Bill would end Social Security benefit taxes, expand payroll tax to wealthy

Sen. Ruben Gallego (D-Ariz.) has introduced the You Earned It, You Keep It Act, which would eliminate federal taxes on Social Security benefits while extending the payroll tax to incomes above $250,000.

“Like a lot of Americans, I’ve been paying into Social Security since my first job at 14. But despite decades of paying into the system, seniors are still forced to pay taxes on their hard-earned benefits — all while the ultra-wealthy barely pay into the system at all,” Gallego said in a statement.

The bill would amend the Internal Revenue Code of 1996 by eliminating the inclusion of Social Security benefits in gross income, beginning in the year after enactment. Rep. Angie Craig (D-Minn.) has introduced companion legislation in the House of Representatives.

Gallego’s legislation comes as President Donald Trump claims he ended taxes on Social Security through the One Big Beautiful Bill Act. That legislation, which passed in July, ensures that nearly 90% of beneficiaries will no longer pay federal income taxes on their benefits by providing an enhanced deduction of $6,000 for taxpayers ages 65 and older. 

Under Gallego’s bill, earnings above $250,000 would remain subject to the payroll tax, extending the Social Security trust fund’s solvency through 2058 — 26 years beyond the current projection that benefits will be reduced in 2032.

Benefits have exceeded revenues since 2021, a trend that’s expected to worsen as the cost-of-living adjustment is estimated to rise by 2.7% in 2026. In 2023, the program collected $1.351 trillion but paid out $1.392 trillion, leaving a $41 billion deficit.

“Eliminating federal taxes on Social Security benefits is a commonsense step to ensure older Americans can keep more of what they’ve earned,” Shannon Benton, executive director at The Senior Citizens League, said in a statement. 

Nancy Altman, president of Social Security Works, added that the bill would reduce income taxes for millions of Americans while “responsibly paying for the tax cut.”

“Moreover, it ensures that all Social Security benefits will be paid in full and on time for the foreseeable future by requiring the wealthiest to contribute to Social Security at the same rate as the rest of us,” Altman added.